Well, I made a mistake in *the way* I shorted the stock. I realized my mistake in execution yesterday but it was too late. I shorted the stock about 1 hour too early. However, that one hour meant that I was about $21,000 in the ditch. No panic though, the shares have dropped from 70 to about 57 now. I am still in the hole, but now the gravity is working in my favor.
Now onto my quote, Markets can remain irrational longer than you can remain solvent?. That is absolutely true. But there is a difference between "irrational" and extreme madness. When a stock trades more than two to four times its value, it is irrational. When it trades more than 10 to 30 times its value, it is a different story. I have data on SIEB going all the way back to 1984. On rare ocassions, it has traded as high as about $5. By and far however, it has remained between $1.5 and $2.5. Unless they have just discovered the cure to cancer or found the world's largest gold mine, they cannot remain trading at than 30 times historical norm and more 60 times revenue. I also went back and looked at all the hyped and mania stocks that I could find (eg, PRST, ZITL, IOM, MU...) at the peak of their bubble. 10 times value seems to be the magic number at which the bubble bursts. I think it would be helpful for SIEB holders to look at those charts between '95~'97.
I've made provisions to cover my margins if it comes to that and intend to ride this out, assuming I remain solvent <G>.
Sun Tzu |
